U.S. Congresses Passes I-gaming Prohibition

[Vallerius]

A few things are certain at the moment. Yesterday Senate Majority Leader Bill Frist (Republican- Tennessee) was able to attach legislation "prohibiting online gambling" to a bill that is supposed to strengthen security at America's sea ports. The port security bill passed with the online gambling amendment in tact and was then sent over to the House of Representatives. The House debated the bill and then voted to approve it shortly after midnight. It was the final action taken by the Congress before it adjourned to prepare for November's election. All that remains is for President Bush to sign it into law, and there is no doubt that he will since this is after all a port security bill.

All of the above is certain. I am today investigating the matter and talking to a lot of friends around the industry to determine what it all means. Here are a few things I feel sure of but have yet to verify:

The legislation that Frist attached is not the same as HR 4411, the bill that passed out of the House in July. You may recall that HR 4411 was actually the synthesis of two bills which sought to prohibit online gambling. Rep. Bob Goodlatte (Republican- Virginia)'s bill sought to update the Wire Act to clearly specify that all forms of gambling via communication devices are illegal, while Rep. Jim Leach (Republican- Iowa)'s bill sought to prohibit payment to online gambling companies. Early reports indicate that Frist attached the Leach provisions to the port security bill but did not attach the Goodlatte provisions.

So technically what the bill says is that it is illegal for an Internet gambling business to accept payment from a customer in the U.S. Most lawyers that I have talked say this is not going to be enforceable. First of all, these businesses are already located offshore. As has been the case in the last ten years they remain outside the jurisdiction of U.S. authorities. It all really reminds me of the CAN-SPAM act of 2003, which was supposed to eliminate spam. You've received a lot less spam since then haven't you?] (*,)

In order to enforce this law, U.S. banks are supposed to become policing agents. They are supposed to begin monitoring every single transaction you make, and if your purchase is for a gambling service then they are suposed to deny it. The banking industry is not pleased with this. The bill will put a nearly impossible burden on the banks and drain resources that ought to be directed at combating terrorism. One severe problem is companies like Neteller deal with other merchants besides online gambling companies, so the banks probably won't be able to block money going to Neteller, and once the money is there they should be powerless to prohibit it from going to a gambling company since Neteller is based offshore and out of jurisdiction. Another problem is that in ACH transactions (my preferred method of gambling payment), the payee is not known, but the Leach bill requires banks to police not only who is being paid but for what sort of product or service.

Both the Independent Community Bankers of America and the U.S. Chamber of Commerce wrote letters to the Senate in August warning that the Leach bill should be amended because it puts impossible enforcement burdens on an already overwhelmed banking industry. There is no language in the Leach bill (at least the last time I saw it) that pertains to advertising. However, it seems plausible to me that the bill would strengthen aiding and abetting charges if the Department of Justice wanted to try that route of attack again. I don't know how this would play out. I don't think portal webmasters would be in the DOJ's scope for a while. Major media companies would be first, and hopefully one of them would muster a fight; after all, they actually advertise for .net educational sites. I believe the typical model for censoring portal sites is that the DOJ would have to first issue a cease and desist order and then give a 90-day period before actually issuing charges.

I am no lawyer or political expert, but I am pretty confident that there is no need to worry yet. The bill probably will not be effective and portal webmasters won't be in its scope for a long time. But then again, we are dealing with an executive office that has done much to erode the Constitution and the governmental checks and balances system in the last four years.

There are a few things that sicken and disturb me about all this. The Senate didn't even debate the online gambling bill; it was attached in the dark of night to a separate bill that could not fail. Is that really how we do things in the land of the free? It doesn't seem very reasonable to rush sensitive matters. Also, this was part of the Republican agenda , and it was probably only rushed so haphazardly so that the Republicans can appeal to their conservative and religious voters.

But the thing that disturbs me most is not even the implications for online gambling but for personal liberties. What the bill asks the banking industry to do is heinous on an Orwellian sort of level. This is a dangerous slippery slope whereby the government can monitor and prohibit every single sort of product and service you buy and from whom. But I suppose we must be protected from ourselves. And the terrorists.

Remember, this is part of the Republican agenda and elections are in November.

[boczom1]

Another problem is that in ACH transactions (my preferred method of gambling payment), the payee is not known, but the Leach bill requires banks to police not only who is being paid but for what sort of product or service.

hmm...so what should we do.. switch all transfers over to Neteller?

[Vallerius]

I'm not sure what to do. I wouldn't do anything yet. Wait and see I suppose. When I say ACH is my preferred method of payment I mean as a gambler, not as a portal webmaster. I don't operate any portals.

[boczom1]

Isnt it possible he could sign the bill as early as today? We need to get a move on.

[Vallerius]

Yeah, President will probably sign within a few days, but realistically the enforcement mechanisms are not going to be in place for a long while.

[MichaelCorfman]

Just a few quick comments.

1. Don't panic. Casino City spent some time researching and thinking about the implications of the full bills as originally proposed, and came to the conclusion there were fairly straitforward adjustments we could make without significant cost that would allow our business to continue without significant effect in a fashion that was fully compliant with legal requirements.

2. It will take a little time to research and understand the implications of the new bills. Right now there is a lot of crazy speculation and hysteria going around. Don't fall victim to it.

3. You can count on us to research the real details and report the true implications for portal webmasters as they are determined and/or become apparent.

4. You can count on us to share solutions to the issues as we see them.

5. Casino City is much more visible, and a much more likely target than the vast majority of portal websites because of our scale of operations. I'm going to sleep fine tonight, and you should too.

Michael

[matted]

There definitely needs to be some clarity around this bill. If there is wording that prohibts US citizens from advertising online gaming, then I see no alternative but to sell out and leave the industry. Anyone see other alternatives without breaking US law?

I hope in 30 years we all look back at this period (2000-2008, the Bush years) in American history and laugh.

[mojo]

Thank you Vallerius for the article and making a such complicated issues understandable. I have read many many posts and speculations. Thanks Michael for the reassuring words. I for one will rely on GPWA for accurate information.

Mojo

[Vallerius]

Reuters has the most informative assessment I've seen so far. They report:

"The agreement... would make it illegal for banks and credit card companies to make payments to online gambling sites...The bill would leave out an additional provision of the House bill that would have clarified that a 1961 federal law banning interstate telephone betting also covers an array of online gambling."

I take that to mean that Goodlatte's provisions to update the Wire Act have been cut while Leach's banking provisions have survived. The link below leads to the text of the bill that Leach introduced last year. I'm still trying to verify it, but I assume the language of whatever was attached to the port security bill yesterday must closely resemble Leach's original bill.

https://www.igamingnews.com/articles/files/HR4411.pdf

[Spearmaster]

1. Don't panic. Casino City spent some time researching and thinking about the implications of the full bills as originally proposed, and came to the conclusion there were fairly straitforward adjustments we could make without significant cost that would allow our business to continue without significant effect in a fashion that was fully compliant with legal requirements.

I would of course like to hear what these adjustments are - at the moment, the way I read the bill, affiliate and marketing sites are not directly affected; however, ISPs and perhaps webhosting services are.

2. It will take a little time to research and understand the implications of the new bills. Right now there is a lot of crazy speculation and hysteria going around. Don't fall victim to it.

Exactly. Well said.

[MrYook]

I will wait patiently until there is some clarity on the bill from the experts.

Here is a copy of the Ports Bill but I'm not sure if its the exact same language that was passed.

http://www.rules.house.gov/109_2nd/t...43_portscr.pdf

Jump to page 213 for the gambling language attached to the bill.

Check out the part that mentions 280 days. I'm not quite sure what that means.

[MichaelCorfman]

I've tried to do some research based on congressional records regarding what has been passed. Thusfar I have not located actual language related to online gaming, but I thought I would at least give details related to the bills that I understand alegedly contain language related to online gaming.

Action by the Senate:

HR 6061 - To establish operational control over the international land and maritime borders of the United States.
On 9/29/2006 at 9:30 PM Passed without amendment by Yea-Nay Vote. 80 - 19
Roll call can be viewed at http://www.senate.gov/legislative/LI...n=2&vote=00262.

Action by the House of Representatives:

HR 4954 - Security and Accountability for Every Port (SAFE) Act on the question On Agreeing to the Conference Report
On 30-Sep-2006 at 12:32 AM Passed with 409 Ayes, 2 Noes
Roll call can be viewed at http://clerk.house.gov/evs/2006/roll516.xml.

Michael

[MichaelCorfman]

I would of course like to hear what these adjustments are - at the moment, the way I read the bill, affiliate and marketing sites are not directly affected; however, ISPs and perhaps webhosting services are.

Yes, my view is that it is really on the ISP/webhosting front where there were issues in 4411 for web portal sites (and I presume also in the new bill). Our parent corporate identity is Information Technology Systems, Inc. and our accessway.net division provides hosting services within the United States for our various websites. Thus as a provider of web hosting services, we would need to comply with possible requests to disable links to online gaming sites under the safe harbor provisions of the bill in order to avoid legal liability.

We have a planned strategy for compliance, and we will share that with others later (perhaps providing a compliant infrastructure to GPWA members) if we determine that corrective actions are actually necessary under the law that was passed.

Michael

[boczom1]

Yes, my view is that it is really on the ISP/webhosting front where there were issues in 4411 for web portal sites (and I presume also in the new bill). Our parent corporate identity is Information Technology Systems, Inc. and our accessway.net division provides hosting services within the United States for our various websites. Thus as a provider of web hosting services, we would need to comply with possible requests to disable links to online gaming sites under the safe harbor provisions of the bill in order to avoid legal liability.

We have a planned strategy for compliance, and we will share that with others later (perhaps providing a compliant infrastructure to GPWA members) if we determine that corrective actions are actually necessary under the law that was passed.

Michael

And this means if were an affiliate, we may have to switch our hosting over-seas?

Its funny, whenever there is a mention in the news of banning online gambling..It is on every news site and every newspaper.. I was just watching FoxNews and they had like 5 minutes on this new Port Security bill that passed and did NOT mention anything at all about the Online Gambling part.. Maybe they also consider this a nonsense bill that has no implications. Otherwise it WOULD of made big news by now.

[MichaelCorfman]

And this means if were an affiliate, we may have to switch our hosting over-seas?

Without reviewing the final language, and proposed work-arounds, with an attorney, it is difficult to be certain. In our case, we were looking at hosting one of our 20 or so web servers outside the United States. All of our links to online gambling sites are through a referral link so we can count outbound clicks, and so we felt we would be completely safe if we just hosted that one script outside of the US.

If we determine that is a necessary and appropriate strategy, then I image we would also provide it as a free service to GPWA members, thus avoiding the need to switch to a non-us based hosting service for those who were not inclined to do so and found using such a redirection service acceptable.

Michael

[MrYook]

According to this article, it won't go into affect for another 280 days. If
thats true, then it will give the country time to get their **** together.

Also, I've read a couple of articles already where it seems that some of the
politicians aren't too happy that Republicans removed important legislation
to protect us against terrorism and replaced those with the gambling bill.

http://www.gambling911.com/internet-...ng-093006.html

[boczom1]

According to this article, it won't go into affect for another 280 days. If
thats true, then it will give the country time to get their **** together.

Also, I've read a couple of articles already where it seems that some of the
politicians aren't too happy that Republicans removed important legislation
to protect us against terrorism and replaced those with the gambling bill.

http://www.gambling911.com/internet-...ng-093006.html

All I know is, if our country is so mentally retarded to keep the Congress/Senate controlled by the republicans again come this november, I am moving out of this country. And im not kidding.

There was brainwashing/political corruptness to have Bush elected president 6 years ago. There was brainwashing/political corruptness to have him re-elected... And with him still in power I wouldnt be surprised if there will be brainwashing/political corruptness to have our next president be republican aswell. From what I hear, the Reps have a ton more money then the democrats to spend on this upcoming midterm election. They will use their corrupt TV commericals to lure in the stupid ones to vote for them come november.

[tropics]

I livethe Caribbean and my webhosting company is in Canada would my webhosting be affected as well? Or would it only affect persons who have webhosting accounts in the US and living in the USA?

[MichaelCorfman]

Hi:

I've found a copy of the port bill as passed. It can be found at the following URL http://saveonlinegaming.com/hr49543.pdf. The portion of the bill relating to online gambling begins on page 213, and runs from there to the end of the bill on page 244 - so it totals 32 pages in length.

A very important aspect of the bill is that it does nothing to criminalize playing at an online gaming site. It remains completely legal for an individual player to play online in the absence of state laws to the contrary.

There is reference to banking regulations being developed within 270 days of passage on page 231. No timeframe is mandated for implementation and enforcement of those regulations.

In terms of financial transactions, the bill is focused on payments to online gaming sites. There is nothing in the bill to allow interference with payments from online gaming sites to affiliate programs. And, in my personal opinion, the industry has already done a pretty good job of dealing with the player payment methods easily attacked under the bill. And the bankers will fight very hard to prevent regulations from being implemented that require them to do any more work.

There are provisions for disabling links to online gaming sites, but I think those provisions will be easy to circumvent via redirection services. In fact, depending on what happens, the requirements here could actually benefit portal sites with affiliate programs.

Imagine if the actual URLs for gambling sites did not work, but that every affiliate program had a way to identify and direct players to online gaming sites using a database of updated ip addresses that changed frequently enough that ISPs could not block them effectively. Suddenly the easy way to get to online gaming sites would be through portal sites, and those sites cannot be blocked under the provisions of the law.

I sincerely hope that does not happen, but I give it as an example of how a bad outcome for the industry as a whole could actually work to the benefit of portal webmasters.

Personally, I'm now going to sleep very well tonight now that I have had a chance to review the actual provisions of the bill.

Michael

[MichaelCorfman]

I livethe Caribbean and my webhosting company is in Canada would my webhosting be affected as well? Or would it only affect persons who have webhosting accounts in the US and living in the USA?

If a site is hosted in the US, then there are provisions in the bill that could require removal of links to online gaming sites with a provision for a hearing before any actual removal could be mandated. However, I believe having a link to a site that was not an actual gambling site, but that redirected to a gambling site, is not subject to any censorship under the provisions of the bill.

Michael